Loading summary
Transcript39 lines
- [00:00]
Narrator
Wondery plus subscribers can binge all four episodes of Business the Unraveling of Boeing early and ad free right now. Join Wondery plus in the Wondery app or on Apple podcasts.
- [00:20]
David Brown
Phil Condit feels his stomach knot as the consultant's presentation grinds forward. It's April 1996, and it's his first day as Boeing's CEO. Boeing is the world's number one aircraft maker. Condit joined the company as an engineer 31 years ago and dedicated his life to reaching this lofty position. But his reign is kicking off with a kick in the teeth. He and 17 other top Boeing execs are in a meeting room at the company's Seattle head office. They've gathered to hear a team of external consultants explain how their biggest rival, Airbus, is undercutting them. Boeing thought little of Airbus when it launched over 25 years ago. It was the brainchild of Western European governments, created as a lifeline for the old World's fading aircraft industry and funded by European taxpayers. It's not even a company, more an awkward coalition of French, German, Dutch, Spanish and British manufacturers. But despite the shaky beginnings, Airbus beat expectations. It's now the only aircraft maker capable of challenging Boeing in commercial aviation. It owns almost 30% of the market, and it's gunning for Boeing's 63% share of the market. So Boeing's called in external consultants to dig into Airbus recipe for success. Condit listens as they confirm the executive team's worst fears. Airbus isn't undercutting Boeing because it lives off government subsidies. Its prices are lower because it's better at building aircraft. Airbus can make just as many planes as Boeing can, but it can do that with half the manufacturing space. Its production lines are more automated and less wasteful, too. The upshot is that Airbus production and tooling costs are as much as 15% lower than Boeing's, and that gives Airbus a major pricing edge. After the consultants leave, Condit listens as his team debates how to respond. He's always been more of a listener than a rash decision maker. He even jokes about how his jug ears make him all the better at listening. But his team members aren't wallflowers, and one of them is certain he knows how to rise to the Airbus challenge. His name is Ron Woodard. He's the lanky president of Boeing's commercial aircraft div, and he wants a war, a price war that will take down the European threat. But the company's new offensive against Airbus is about to set Boeing on a downward trajectory that will see it go from king of the skies to a company trapped in a tailspin, one that threatens to destroy one of America's most important manufacturers. You know your team spends over half their time writing, and we all know how that happens.
- [03:20]
Narrator
One confusing email turns into 12 confused.
- [03:22]
David Brown
Replies and a meeting to get all lined up again.
- [03:26]
Narrator
Well, Grammarly is a trusted AI writing partner that saves your company from miscommunication and all the wasted time and money.
- [03:33]
David Brown
That goes with it.
- [03:34]
Narrator
What I love about Grammarly is that it doesn't just correct grammar, it helps you strike the right tone for your.
- [03:39]
David Brown
Audience so you can improve both the substance and the style of your writing. And you know, four out of five.
- [03:44]
Narrator
Professionals professionals say Grammarly helps them get buy in and action through their communication. Plus it integrates seamlessly across 500,000 apps and websites so there's no cutting, no pasting, no context switching. Join over 70,000 teams and 30 million people who trust Grammarly to get results.
- [04:03]
David Brown
On the first try.
- [04:05]
Narrator
Go to Grammarly.com enterprise and learn more. Grammarly Enterprise Ready AI this episode is brought to you by State Farm. You've got to be kidding. It's something you might say when your small business has a problem, but that won't get you the help your business needs. What you should really say is something that can help. Like a good neighbor, State Farm is there. Their agents are ready to help you with your claim, to help you get back in business on the phone or in person. Your State Farm agent is there to help. Like a good neighbor, State Farm is there.
- [04:45]
David Brown
From wondering I'm David Brown and this is Business Wars. In the last episode, aviation regulators grounded the Boeing 737 Max after two fatal crashes, leaving the company struggling to save its finances, stock price and reputation. But the seeds of this business disaster were sown years earlier. In this episode, we rewind to the late 1990s to find out how an aerospace mega merger and fierce competition from Airbus set Boeing on a new course. A course that would end in tragedy. This is episode two, change of destination. It's mid-1996. Several weeks have passed since the consultants briefed Boeing's executives on Airbus price advantage. And at Boeing head office in Seattle, the company's commercial aviation president, Ron Woodard, is pitching a dream. He's a lanky, pushy man who relishes confrontation. His dream is to extinguish the threat from Airbus, and he wants Boeing chief executive Phil Condit to embrace his plan to make that dream realistically. On the surface, the plan is simple. Boeing will Launch a full throttled price war with Airbus, its only major rival in civil aviation. He walks Condit through the plan. Currently, the maximum discount Boeing offers Airlines is 10%. But Woodard wants to offer airlines up to 20% off, maybe even as much as 30%. Whatever it takes to beat Airbus on price. In every negotiation, Condit listens without comment. He wants to hear out Woodard's plan in full. First, Woodard moves on to the second part of his plan to take down Airbus. Not only will Boeing offer airlines discounts on jetliners, but it'll deliver those planes fast. Right now, airlines place orders and then have to wait three to four years for Boeing to build, test and deliver them. Woodard wants to slash the wait times not by months, but by years. To do it, Boeing will have to overhaul its entire production operation. But by eliminating waste, Woodard is confident the company can boost productivity and slash costs. Those savings will pay for the price discounts to airlines and allow Boeing to deliver airplanes faster. It's a neat plan, almost too neat, And Condit knows it's easier said than done. But Woodard's a forceful man, and convincing, too. So Condit approves his aggressive sales strategy. But Condit's backing the plan not only to get it, Airbus. There's another factor at play too. McDonnell Douglas. The St. Louis based McDonnell Douglas used to be Boeing's foremost rival, but its civilian aircraft division lost its way years ago. These days, it makes its money making F15 fighter jets and Apache helicopters for the US military. But since the Cold War ended, military budgets have been shrinking, a decline that's weakening McDonnell Douglas. So Condit wants to seize the moment to strengthen Boeing's military business by buying its old rival. But to pay for it, Boeing needs a high stock price, something the rapid growth promised by Woodard's new sales strategy would deliver. So with the sales push underway, Condit opens buyout talks with McDonnell Douglas Foreign. It's December 1996, and Condit is ready to seal the deal on a buyout of McDonnell Douglas. He's invited McDonnell Douglas CEO Harry Stonecipher to Seattle for a one to one at Boeing Suite at the Four Seasons Hotel. They're here to hash out acquisition terms. Condit and Stonecipher have crossed paths for years at industry events and on the golf course. But while friendly with one another, they make an odd couple. Condit is quiet and thoughtful. Stonecipher is grizzled and as abrasive as sandpaper. He's also a disciple of Jack Welch, the General Electric boss who preaches that the paramount duty of any company is to enrich their shareholders, even if that means sacrificing market share. Stonecipher applied that mantra at McDonnell Douglas. He focused the business on military aircraft and left its troubled commercial arm to wither. Then he used its cash reserves and research budget to buy back a huge chunk of the company's stock. That buyback curtailed the supply of McDonnell Douglas stock on the market, inflating its stock price even as the company fell behind its peers. Then the Pentagon dropped a bombshell. It kicked McDonnell Douglas out of the race to create the Joint Strike Fighter. And having lost out on a slice of that $300 billion military project, McDonnell Douglas is heading for collapse. But instead of coming to Seattle to beg Boeing to rescue his ailing company, Stoneciphers come with a list of demands. Condit listens as Stonecipher lays out his non negotiables. First, McDonnell Douglas stockholders won't take a lowball offer just because the company's in trouble. Condit doesn't object. Owning McDonnell Douglas would give Boeing a bigger share of the military market, and chances to do that are rare. With strength in both military and civil aviation, Boeing will be less prone to the ups and downs of the commercial side. They agree that McDonnell Douglas shareholders will get just over $13 billion of Boeing stock in return for their company. Stonecipher moves on to demand number two. McDonnell Douglas will get board seats after the merger, Condit says. Sure, he knows that'll make it easier to integrate the two companies. Next, Stonecipher presses for a leadership role for himself. Condit agrees that he can be chief operating officer and president of Boeing after all. Stonecipher's 60 years old. Condit figures he won't hang around for long. The Then Stonecipher issues the final demand. The merged company will be named Boeing McDonald. The McDonnell family wants to preserve their legacy. Condit refuses. Boeing is buying McDonnell Douglas. Stonecipher lets that demand slide. The two shake hands. The merger is on, but it'll take months to get approval from shareholders and the world's governments. And since Boeing is paying mainly with stock, Condit needs to ensure its stock price stays high. Because if the price declines, Boeing will have to hand over more of its shares to McDonnell Douglas stockholders to reach the agreed price. But Boeing's new aggressive sales drive has that problem under control. Its main rival, Airbus, is already feeling the pressure of Boeing's new strategy. Discounted jetliners delivered fast. It's 1997 in Arlington, Virginia, and in a corner office Near Washington National Airport. Airbus Jolly CEO Jean Pearson smiles cautiously. He's just flown in from France, hoping to land one of the biggest deals in aviation history. The Airbus sales team has spent months negotiating the deal with US Airways, and they told him this meeting would be mere ceremony. Just shake hands with US Airways chief Stephen Wolf, then return to France with an order for 400 planes. That's worth up to $14 billion. But Wolff had other plans. When Pierson arrived at US Airways headquarters this morning, Wolff handed him a long list of last minute asks. So he patiently worked through the list so they could reach an agreement again. Now Pearson smiles hopefully at Wolf. So we're good? We have a deal now? Yes? Wolf leans back into his chair and gently strokes his gray cowboy mustache. Actually, no. I need more. More? Yeah. Pearson folds his arms and moves to rest them on his stomach, but misses. His doctor has put him on a strict diet. That's left his belly less prominent and his suit loose and baggy. Pearson unfolds his arms and narrows his eyes instead. Steven, I just gave you plenty. What more could you want? I want the deliveries to start six months earlier. No, Steven, that's impossible. Impossible? Boeing says they can deliver quicker. Saying and doing are not the same. But we could bring the delivery schedule forward two months. Three months. Fine, fine. Now surely we have a deal. Yes. Nope. I also want 5% off. 5% off of what? Off the price of everything. Aircraft, spare parts, pilot training, the works. Pearson locks eyes with Wolf. Airbus needs this sale. Boeing's heavy discounts and promises of fast delivery are thinning out Airbus order book. But US Airways has already extracted far too many concessions. Pearson considers what to do for a moment. Then he stands and reaches for his belt. He unbuckles it and allows his baggy pants to fall to his ankles. Wolf stares in shock at the Airbus chief standing before him in his underwear. See, Stephen, I have nothing left to give. Not even my dignity. Wolf notices that his office door is wide open. The entire executive floor now has a view of his French guest standing in his office with his pants down. All right, all right, point taken. Forget the 5%. Then a look of mischief flashes on Wolf's face. He calls to his secretary, Bring the champagne. Pearson scrambles to haul his pants back up his legs as Wolf's secretary rushes in with a bottle of champagne and two glasses. Airbus has its deal, but it nearly lost it. Boeing's energetic sales blitz has left the European aircraft maker vulnerable. It's now in a weakened position. It will have to cave to airline demands just to stay in contention, in 1996, Boeing doubles the number of orders from airlines to more than 700 aircraft, more than twice as many as Airbus. But while its order book is bulging, its assembly lines are buckling under the avalanche of sales. Orders are coming in faster than the company can build aircraft. Despite herculean efforts to accelerate production, suppliers can't produce parts fast enough, causing snarl ups that force Boeing to park half finished jets on the tarmac outside its production plants. Workers pull triple shifts and stick still can't catch up. And in the rush, more and more mistakes are made. At the 737 plant in Renton, Washington, plane production gets out of sync. Planes are being painted before they are wired, forcing them to halt work and send the aircraft back to wiring. And once wired up, the plane has to go back to be painted again. Mistakes that add to the delays and growing backlog. Supervisors plead with their bosses to halt the production and give their teams a chance to get on top of the chaos. But every time their request gets rejected, Condit and the rest of Boeing's top brass know that halting production will expose the company's problems and alarm Wall Street. And if that panic causes its stock price to tumble, the McDonnell Douglas purchase will cost even more. There's also fear the problems could cause McDonnell Douglas to bail on the deal. So Boeing's senior leadership looks the other way, refusing to deal with the chaos on the production floor until the merger is finally signed off on by regulators. It takes until August 1, 1997, for the merger deal to complete. But it takes another two months before Boeing finally moves to fix the mess. In October 1997, after months of strain, Boeing shuts the production lines for its 737 and 747 jets for three weeks. The manufacturing meltdown forces Boeing to write off $2.6 billion. Enraged stockholders file lawsuits. Airlines, who will now get their planes much later than promised, demand millions of dollars in late delivery penalties. Boeing's reputation as a paragon of American manufacturing takes a big hit. And that st gives Airbus a chance to strike back.
- [18:14]
Narrator
As business owners and managers, you use.
- [18:17]
David Brown
Software for your business. Every day.
- [18:19]
Narrator
You use one piece of software to.
- [18:20]
David Brown
Manage your customers, another to manage your employees, another to manage your finances.
- [18:24]
Narrator
And the list goes on. You buy these pieces independently and hope.
- [18:29]
David Brown
They fit neatly together like a puzzle. And then you find out the hard.
- [18:33]
Narrator
Way that they don't, and you end.
- [18:34]
David Brown
Up with a mess at the heart.
- [18:36]
Narrator
Of your business operations.
- [18:37]
David Brown
Does any of this sound familiar?
- [18:39]
Narrator
Well, fortunately, Zoho offers a solution to this chaos.
- [18:43]
David Brown
It's called Zoho One.
- [18:45]
Narrator
Zoho One is a suite of around 50 pre integrated business applications that fit together beautifully. So instead of dealing with disparate software from multiple vendors with multiple contracts and.
- [18:57]
David Brown
Price points, you deal with one vendor.
- [19:00]
Narrator
With all the pieces of the business software puzzle neatly put together, offered at a very attractive price.
- [19:07]
David Brown
Now, if this sounds interesting to you.
- [19:09]
Narrator
You gotta check out Zoho One. At Zoho One, that's Z O H O dot 1E. With Zoho, you're not just licensing apps, you're licensing peace. When it comes to finding the best financial products, have you ever wished someone would do the heavy lifting for you? You know, take all that research off your plate? I sure have. And with NerdWallet's 2025 Best of Awards, well, that wish has just come true. The nerds already did the work for you, reviewing over 1,100 financial products like credit cards, savings accounts, and a whole lot more to bring you only the best of the best. You gotta check out the 2025 Best of Awards today at NerdWallet. Awards.
- [20:12]
David Brown
It's January 1998, and in Palm Springs, California, Boeing's managers are attending their annual retreat. And despite the warm sun overhead, a cloud hangs over the event. It's the first retreat since the company merged with McDonnell Douglas. But instead of celebration, Boeing's reeling from a production crisis and a loss of nearly $180 million, the first loss since 1959. Then there are the new working styles imported from McDonnell Douglas. Managers thought Boeing was buying McDonnell Douglas, but insiders now half joke about how McDonnell Douglas bought Bo Boeing with Boeing's money. And the man who most embodies the wind of change at Boeing is the man now on stage, the company's new president, Harry Stonecipher. He's already imposed a new policy called the 515 rule. It states that all memos must take less than 5 minutes to read and 15 minutes to write. He's also brought with him a gang of McDonnell Douglas executives who, like him, want Boeing to prioritize shareholder returns. Stonecipher eyes the hundreds of Boeing executives crammed into the hotel's vast conference hall. Then he asks the managers in charge of commercial aircraft production to stand around. 200 people stand up. Stonecipher leaves them hanging for a moment, then tells them they need to apologize to the entire company for missing their financial work goals. After the humiliated managers sit back down, Stonecipher warns the room that Boeing's sole threat is from within the failure to execute is the number one enemy, not Airbus. In summer 1998, Stonecipher gets Condit to publicly and suddenly fire Ron Woodard, the mastermind behind Boeing's discount driven sales push. Two days later, several of Woodard's top reports also get fired. Next, Boeing's financial chief is fired, allowing Stonecipher to step in as acting Chief Finance Officer. Stonecipher uses the position to accelerate his push to convert Boeing from a great engineering company into a great business. Central to that plan is convincing Wall street that Boeing is a great investment. So Stonecipher focuses on Rona, the return on net assets. That's a measure of how efficiently a company uses its assets, and the higher it is, the better. So Stonecipher moves to push Boeing's Rona score up. He starts selling Boeing plants, spinning them out to create an ecosystem of small suppliers that depend on orders from Boeing. And the advantage of these small suppliers is, is that they can be squeezed on price. Old school Boeing managers warn this will put quality at risk. Stonecipher rejects that idea for him. And Boeing's new regime, maximizing shareholder returns, is prized above all else. Stonecipher believes businesses exist to make money for their owners, and if tradition, employees and innovation get in the way of achieving that, then those are barriers to success that need to be dismantled. But while Boeing is putting innovation on the back burner, Airbus sees it as an opportunity. It's May 2000 and in Singapore Airlines headquarters, a 79 year old man in a short sleeved shirt is causing a commotion. The airline's executives gasp as the hunched retiree strolls down the sixth floor corridor towards the boardroom. One nervous employee approaches, timid as a teenager asking a celebrity for an autograph, and asks if he may shake the man's hand. The elderly American looks surprised, but obliges. The thrilled employee grins as they shake hands. He can't believe it. He's actually shaking hands with Joe Sutter, the Boeing engineer who built the 747 Jumbo Jet, the biggest passenger jet ever made. Sutter's an industry legend, a straight talking old school engineer, and Boeing sent him here to convince Singapore Airlines to snub Airbus latest project, the A380. Airbus calls it the Super Jumbo, and it's designed to make the 747 extinct. The 747 is a thorn in Airbus side it's a huge moneymaker for Boeing, but Airbus has no equivalent jet to offer airlines. So Boeing has no need to discount 747s to win sales. If an Airline needs a jumbo, it has to buy from Boeing. And the profits from the 747 allow Boeing to reduce margins on its other jets, helping it to undercut Airbus on price. So Airbus is going on the attack, but not head on. Instead, it's going to try and split the jumbo market. It's already using its wide bodied a 340 jet to appeal to airlines that need plenty of seats but doubt they can fill a 747. Now it's building a super jumbo a 380 to peel away the customers who wish their 747 had more room. And that strategy's got Boeing spooked. If Airbus plan works, the 747 will lose sales in both directions and its profits will crumble. So while Airbus continues trying to build its super jumbo, Boeing's trying to convince airlines to steer clear of it. Sutter takes a seat in the boardroom. And as the excited Singapore Airlines executives listen, he starts picking holes in Airbus A380 project. He questions how Airbus is going to build a heavy jumbo jet with two stories and more than 500 seats, but also make good on its claim that it'll be cheaper to fly per passenger than a 747. It just doesn't add up. He urges them to hold off on making a decision about whether to buy any A380s until they've seen Boeing's plan for a stretched 747 400. The executives seem to lap it up, but really they're just thrilled to hang out with Sutter. And they're not excited at all about buying a longer 747. In fact, it just underlines why they and other airlines are turning to Airbus for while Airbus is bringing new jets to market, Boeing's playing it safe. Boeing used to be the trendsetter, but these days it's an aircraft manufacturer that seems terrified of spending the billions of doll needed to bring a truly new jet to the market. And that's about to come back to bite them. It's June 2000 and Airbus is holding a news conference at a hotel in Paris, France. As aviation journalists take notes, Airbus skinny CEO Noel Forjard delivers the news with a huge smile on his face. Airbus is now the market leader. In 1999, it sold 85 more planes than Boeing. The days when America alone ruled civilian aviation are over. Then Forjar delivers another announcement. Airbus is going to become a real company. The French, German and Spanish manufacturers behind it are merging to create a new company called eads. The European aeronautic defense and space company Airbus will be a subsidiary of EADS with its own factories and accounts. The cumbersome bureaucracy that used to slow Airbus down will now be gone. Then Forjar delivers his third good news story of the day. Europe's governments have agreed to help fund the development of the A380 superjumbo with low interest loans. The journalists are skeptical. The rise of low cost airlines has led to more people flying direct to their destinations rather than to large hub airports. Many doubt there's a need anywhere for a plane capable of seating 900 people. Vorjard dismisses the objections. Airbus estimates that demand for air travel will triple in the next 20 years. The A380 will allow airlines to meet that demand without having to put on extra flights. But Boeing agrees with the skeptical journalists. It thinks the trend is away from hub airports. Low cost airlines prefer flying to their end destinations rather than going through expensive hub airports. Passengers who can afford it prefer to fly direct and avoid the risk of lost luggage and missed connections. Instead, Boeing thinks the future is in mid sized planes that are more fuel efficient than jumbo jets, which only become economical when filled close to capacity. The way Boeing sees it, what the market really wants are fuel efficient mid sized planes that can fly long range. Trouble is, the company's far from sure it wants to bet on that prediction with cold hard cash. It's late 2002, and in Boeing's new high rise headquarters in Chicago, CEO Phil Contet is updating the board on the Sonic Cruiser. Boeing's been touting this futuristic aircraft for nearly two years. It's designed to travel just below the speed of sound, and that's fast enough to shave three hours off Trans Pacific flight times. But while Boeing thinks it's the plane of tomorrow, airlines don't agree. Condit nudges his spectacles up his nose and runs through the feedback. Airlines prefer reduced consumption to increased speed. They don't think passengers will pay a premium to travel faster. They also worry that the Sonic Cruiser won't plug into route networks built around the speed of conventional jets. They're more interested in the 7e7 than the Sonic Cruiser. The irony isn't lost on the board. The 7e7 is not even a serious proposal. It's just a bunch of theoretical figures created to show airlines what it would look like if you applied the Sonic Cruiser's lightweight composite structure to a standard jet. But now, like an opening band upstaging the main act, the super efficient 7e7 is becoming the star of the show. Stonecipher, now vice chairman of the company, leans forward in his chair. So what do we do? Dump the Sonic Cruiser and go with a 7e7? Well, airlines seem keen on the 7e7, so maybe we could explore that instead of the Sonic Cruiser. But there's no rush. It's still safer to develop new derivatives of our existing products. Board member James McNerney interrupts. He's not keen on Condit's play it safe approach. Phil, we haven't approved the development of a new aircraft for 13 years. If we dither much longer, we'll lose our chance to leapfrog Airbus. Stonecipher cuts in straight away. Spending billions on a new aircraft design doesn't sit well with his quest to deliver shareholder value. Bringing the 77 to market will cost $10 billion. That's way too much. I won't back anything that expensive. Airbus doesn't have to worry about repaying the governments that fund its new products. But we. We have to answer to our lenders. Sure, Harry, but we can't sit on our hands forever. The 757 and 767 are in their twilight years. If we vacate the midsize aircraft space, Airbus will fill it. We should forget the Sonic Cruiser and focus on the 7e7. That's what airlines want. The board backs the plan to design the 7e7 over the next few months. The 7e7 takes form. Engineers design a super efficient mid sized twin jet that will be built from the same lightweight composite materials the Sonic Cruiser was going to use. Boeing's finance teams identify outsourcing as the best way to mitigate against the financial risk of bringing a new aircraft to market. So it commissions hundreds of suppliers across the world to create the parts and systems that will eventually be assembled at Boeing plants. And as the project gathers momentum, the company gives the 7E7 a new name, the 787 Dreamliner. Before condit can make a call on whether to put the Dreamliner into production, Boeing finds itself accused of of bribery. And that's going to play right into Stonecipher's hands.
- [32:45]
Narrator
Imagine getting a message from your favorite brand that feels like it was created just for you. Chances are they're using Attentive, the SMS and email marketing platform designed to help brands build and connect with their ideal audience. See, Attentive helps marketers create unique messages for every subscriber, transforming the consumer shopping experience and maximizing marketing performance.
- [33:08]
David Brown
But how does it work?
- [33:09]
Narrator
Well, you see, Attentive's AI learns what subscribers actually want based on their real time interactions with your brand. That means it customizes the content, tone and timing of every message so they always resonate. Are you ready to take customers on a journey created just for them? Visit attentive.combusinesswars to learn more. What separates the true leaders from the rest? It's not just vision and ambition. It's the courage to take the road less traveled. For those with a palpable passion for life who lead by example, there's the Range Rover Sport. The Range Rover Sport is a new dimension of sporting prowess where sophisticated refinement meets visceral power. A dynamic launch delivers maximal torque for increased straight line acceleration, and with rapid DC charging and an estimated all electric range of 48 miles, the range Rover Sport Plug In Electric hybrid delivers thrilling performance with an electric edge. Build your Range Rover Sport@Land RoverUSA.com Visit Land RoverUSA.com to configure your Range Rover Sport. Explore the Range Rover Sport@Land RoverUSA.com.
- [34:23]
David Brown
Foreign It's December 2003 and on the 36th floor of Boeing's headquarters in Chicago, it's Harry Stonecipher's first day as CEO and he's inherited a mess. He sits in his office getting ready for his first board meeting as the boss while trying to ignore the pings of emails arriving in his inbox. He knows what's on those emails. More updates on the scandal that's shaking Boeing to its core. The scandal made headlines two months ago after it was revealed that Boeing's finance chief helped the company win a $23 billion military contract by offering a Pentagon official a high paid job. Now senators are out for blood, the Justice Department is considering criminal charges, and the Pentagon is threatening to shut Boeing out of military contracts worth billions. Faced with the intense fury from dc, Condit resigned as CEO. Now it's Stonecipher's job to put out the fire that's threatening to burn the company to the ground. A 50 something woman with short brown hair enters the office. She's Bonnie Sudic, Boeing's head of internal governance. Stonecipher glances up at her. Be careful, Bonnie. It's raining s in here. Sudik smiles awkwardly. Okay, what do you need? I need a code of conduct. One that applies to every single employee. I need it to be strict, real strict. Zero tolerance of any misdemeanors. We have to be pure as the driven snow. Now you got it? Absolutely. I can have it ready in four months. Maybe you didn't understand me, Bonnie. You're looking at your calendar. I'm looking at my watch. You've got one month. Orders issued. Stonecipher grabs his notes for the board meeting and races out the door and into the boardroom. And he doesn't waste time there either. After explaining his plan to introduce a new code of conduct, he shifts his focus to what he hopes to do as CEO of Boeing. And his top priority is Airbus. I want to go after Airbus, and hard. First we bring the 787 Dreamliner to market. Airbus is busy with its Super Jumbo, so if we do that now, we can grab the midsize market. Before they can respond, the directors break into smiles. Putting Boeing's first new jetliner since 1989 into production will be a welcome respite from the current onslaught of bad news and one that could help Boeing turn the tide and pull ahead of Airbus once again. And while Boeing gets to work in turning the 787 Dreamliner from a paper plane to a real jet, Airbus ambitious super Jumbo project runs into trouble. After years of work, the company discovers a small yet major problem in the design for the A380. Each of its super jumbos contains more than 300 miles of electrical cables. But when Airbus teams in Toulouse, France, attempt to wire up the first A380s, they discover an unexpected problem. The wires are too short by a few centimeters, and that means they can't make the vital final connection. In spring 2006, armed with this news, the head production manager travels to Paris to explain the situation to Noel Forjard, co CEO of EADS Airbus parent company. He explains how the error was caused by the A380's German team using an older version of the design software than their counterparts in France. Forjard takes the news badly. The A380 is a $13 billion project that's already behind schedule and over budget. Now, a few missing centimeters of wire are going to delay the planes another six months and cost Airbus billions. He asks why they can't just add some more wire to extend the connection. The production chief explains that would increase the electrical resistance of the wires and reduce power throughout the aircraft. The only solution is to tear the wires out of every A380 in production and start over. Porchard puts his head in his hands. He knows this delay will finish him. In June 2006, Airbus announces a six month delay to the delivery of the first A380s. It informs investors that this will cost the company 2 billion euros over four years and watches its stock price fall 26%. A few weeks later, fourjard's out of a job. But as the six month delay turns into a year, customers grow frustrated. Airlines and cargo carriers start canceling orders and demanding late delivery payments. Airbus sends hundreds of German workers to its plant in Toulouse to try and get production back on track. But the A380 just slips further and further behind schedule. And while Airbus struggles with its super jumbo, Boeing is gathering speed in July 2000. In 2007, Boeing invites 15,000 aviation fans to Everett, Washington to witness the unveiling of the 787 Dreamliner. The thrilled crowd watches as the massive doors of the Dreamliner's assembly plant roll back to reveal a blue, white and silver jet adorned with a Boeing logo.
- [40:00]
Narrator
They clap and cheer.
- [40:02]
David Brown
It's the first proper new Boeing passenger jet in over a decade. And they hope it's going to revitalize America's top planemaker. It's yet to fly, but the Dreamliner is an aviation sensation. It's already the fastest selling plane Boeing's ever made. Airlines love its fuel efficiency, high tech features and passenger pleasing tall windows. Boeing has 700 orders and a six year waiting list. But when the aviation fanatics get the chance to to see the Dreamliner up close, their shock in the fuselage, they notice there are temporary fasteners and holes. It soon dawns on them that this isn't a finished airplane. What Boeing's actually showing them is about as airworthy as a toy model plane. It's held together with make do parts and fake surfaces. And there's a reason for that. Boeing has outsourced much of the production of the Dream to its global network of external suppliers. But these suppliers are struggling to get up to speed on the aircraft's advanced tech and composite materials. They're behind on making everything from the Dreamliner's computer software to forging the titanium fasteners that hold the plane together. But at Boeing headquarters in Chicago, no one's fretting. They believe these are just teething problems and they've got time to fix them. Airbus answer to the Dreamliner. The A350 is still years away from production. And the Troubles with the A380 are a major distraction for its European nemesis. But Boeing is getting overconfident because Airbus is about to spark panic by taking aim at Boeing's best seller, the 737. On the next episode, Airbus wows airlines with the A320. Neo Boeing hurries to update the 737. And disaster strikes in Indonesia. If you like business wars, you can binge all episodes early and ad free.
- [42:13]
Narrator
Right now by joining Wondery plus in.
- [42:15]
David Brown
The Wondery app or on Apple Podcasts. Prime members can listen ad free on Amazon Music. Before you go, tell us about yourself by filling out a short survey@wondery.com survey from Wondery this is episode two of the Unraveling of Boeing for Business Wars. If you're interested in hearing more about Boeing, we recommend Boeing vs Airbus by John Newhouse and Flying Blind by Peter Robison. A quick note about the recreations you've been hearing. In most cases, we can't know exactly what was said. Those scenes are dramatizations, but they're based on historical research. I'm your host, David Brown Written and produced by Tristan Donovan of Yellow and researched by Marina Watson. Sound design by Joe Richardson Fact checking by Gabrielle Jolais Voice acting by Chloe Elmore. Our managing producer is Desi Blaylock. Our senior Managing Producer producer is Colin Plews. Our producers are Tristan Donovan and Grant Rutter. Our senior producers are Emily Frost and Dave Schilling. Our executive producers are Jenny Lauer, Beckman and Marshall Louie for wondering.
- [43:28]
C
And now a next level moment from AT&T business. Say you've sent out a gigantic shipment of pillows and they need to be there in time for International Sleep day. You've got AT and T5G so you're fully confident, but the vendor isn't responding and International Sleep Day is tomorrow. Luckily, AT&T5G lets you deal with any issues with ease, so the pillows will get delivered and everyone can sleep soundly, especially you. AT&T5G requires a compatible plan and device coverage not available everywhere. Learn more@att.com 5G Network.